Fed Crackdown on Cash Real Estate Deals Greeted With Shivers, Yawns

Opinion remains divided on the likely fallout of Wednesday’s announcement by the U.S. Treasury Department that it will begin requiring the names of people who make cash purchases of luxury Manhattan real estate through shell companies, a campaign to crack down the laundering of dirty money. Some New York real estate insiders yawned at the announcement, while others shivered and one called it a “witch hunt.”

Aaron Shmulewitz, a real estate lawyer with Belkin Burden Wenig & Goldsmith, told Habitat: “The newly announced test regulations are likely to have an immediate adverse impact on Manhattan real estate, although probably not as severe as feared. While some foreign buyers who want to ‘park cash’ in luxury Manhattan apartments will be leery of doing so, sophisticated, well-advised foreign buyers will still be able to find ways around the disclosure requirements.
 
“However,” he added, “if these regulations stay in place...their long term impact will actually hurt City and State governments – and their citizens – who have grown dependent on the healthy money flow. Foreign investors who want to park cash will find other parking spots for it, in other countries. Killing a golden goose, anyone?”

Michael Graves, a broker with Douglas Elliman, tells The Read Deal that the bulk of his deals above $8 million are all-cash transactions through limited liability companies – the very deals the feds are targeting.

“The vast majority of these transactions are simply people who want to protect their identities for the safety of themselves and their family,” Graves said. “By and large, the feds will find it’s a witch hunt.”